Shareholder Engagement Activity Report Q2 2007

Transcription

1 Shareholder Engagement Activity Report Q April 1, 2007 to June 30, 2007

2 Engagement at a Glance Engagement Themes Dislcosure & Transparency Human Rights Labour Footprint Corporate Governance Environment Total Number of Companies Engaged This Quarter: 41 S&P/TSX 60 Index S&P/TSX Composite Index Engaged this quarter 37% Engaged this quarter 15% Sectors Engaged this Quarter Other 11 Real Estate 2 Retail 3 Information Technology 3 Oil, Gas & Chemicals 6 Financials 6 Mining & Materials 1 Communications 4 Industrial Technology 7 2

3 Contents Executive Summary 3 Activity Snapshot 4 Disclosure & Transparency 5 Human Rights 6 Global Labour Footprint 6 Corporate Governance 7 Environment 7 Shareholder Resolutions 8 Company Progress Summary 8 About SHARE 9 Executive Summary This report details the activities of SHARE s Shareholder Engagement Programme for the second quarter of SHARE conducts focused and constructive engagement dialogues with Canadian corporations on behalf of institutional shareholders with the intention of improving the environmental, social and governance (ESG) performance of the companies in our clients investment portfolios. For more information on SHARE s shareholder engagement services please visit This quarter, SHARE contacted 41 Canadian companies regarding their performance on a range of issues including sustainability reporting, human rights, executive compensation, precarious employment practices and carbon risk disclosure. Five companies responded to our letter on the Global Reporting Initiative (GRI) this quarter. We are happy to report that Westport Innovations will be publishing its first GRI report next year. Nortel Networks has indicated they are reviewing their reporting practices in an effort to improve the relevance of their disclosure for investors, however the company has not made a commitment to use the GRI in the future. To date, 17 companies or 44% of the companies contacted by SHARE have responded to our request for information on disclosure and sustainability reporting practices. Engagement on Human Rights continues to focus on Goldcorp Inc. A coalition of investors met with executives at Goldcorp in April 2007 to discuss sustainability management issues, and we continue to monitor the company s progress. Precarious employment, which SHARE has defined as those practices that favour shortterm, temporary, low-wage and insecure employment, is a new area of focus this quarter. SHARE contacted two property management companies, Brookfield Asset Management and Morguard Corporation, on behalf of the Atkinson Charitable Foundation, regarding the working conditions of property service workers at the companies commercial properties. SHARE and the Atkinson Foundation are seeking meetings with each company in Q to discuss the issue of vulnerable workers and precarious employment. On the issue of Supply Chain Management, SHARE has written to Aber Diamond Corporation (Harry Winston) on behalf of Meritas Mutual Funds to request a meeting 3

4 with management regarding labour standards in the company s jewellery supply chain. We have also corresponded with Canadian Tire Corporation on monitoring and management of the company s apparel and non-apparel supply chains. On corporate governance issues, SHARE focused on the issue of implementing an advisory vote on executive compensation. This quarter SHARE received confirmation from Cognos Incorporated that the company will not implement an advisory vote on executive compensation. SHARE also wrote to an additional six financial services companies on behalf of Meritas Mutual Funds, to raise the issue of an advisory vote. Responses from these companies are expected in Q Regarding climate change, SHARE contacted seven companies on the Meritas Jantzi Social Index, encouraging the companies to participate in the fifth annual Carbon Disclosure Project (CDP) questionnaire. The annual questionnaire seeks to capture valuable information on the greenhouse gas emissions of the largest publicly traded companies in the world. Approximately 280 of Canada s largest corporations have been asked to participate in the questionnaire this year. Activity Snapshot Disclosure & Transparency Companies 22 GRI Reporting Algonquin Power, ATS Automation Tooling, Ballard, Biovail, Gennum, Husky Injection Moulding, IGM Financial, Jean Coutu, Loblaw Companies, Manitoba Telecom, MDS Inc., National Bank of Canada, Nortel, Nova Chemicals, Novelis, QLT, Shaw Communications, Thomson Corporation, Toromont Industries, Transcontinental, Westport Innovations, Zarlink Semiconductor Human Rights Companies 1 Human Rights & Extractive Goldcorp Inc. Industry Labour Footprint Companies 4 Precarious Employment Morguard Corporation, Brookfield Asset Management Supply Chain Management Aber Diamond (Harry Winston), Canadian Tire Corp Corporate Governance Companies 7 Advisory Vote on Exec. Comp. Cognos, CIBC, Bank of Montreal, Bank of Nova Scotia, Manulife Financial, Royal Bank, TD Bank Environment Companies 7 Climate Risk Disclosure Agrium, Research in Motion, TransAlta Corporation, Ensign Energy, Precision Drilling, Rogers Communications, Loblaw Companies Total 41 4

5 Disclosure & Transparency GRI Reporting Engaging companies on disclosure and sustainability reporting continues to be a key part of SHARE s activities. We believe that corporate transparency and robust disclosure of social and environmental performance is key to ensuring that shareholders have access to the information they need to make informed investment decisions, allowing Canada s capital markets to function more efficiently. During phase one of our GRI Reporting project, SHARE wrote to 18 companies regarding social and environmental disclosure. The initial letters were sent in October 2006 requesting more information about each company s transparency and reporting practices, as well as its familiarity with the Global Reporting Initiative (GRI). 1 To date, SHARE has received responses from 12 of the companies contacted in Phase One. Phase two of SHARE s GRI Reporting project was initiated in Westport Innovations will March SHARE contacted an additional 21 companies regarding disclosure and the GRI. In the second quarter of publish its first GRI report in 2007 our activities focused on sending reminder letters to May The company is the companies that had not yet responded to our phase two letters. Of the 21 companies contacted in phase two, only currently gathering internal five companies have provided a written response: IGM social and environmental Financial, National Bank of Canada, Nortel Networks, performance data. Westport s Toromont Industries, and Westport Innovations. first GRI report will include Westport Innovations will publish its first GRI report next data for the past three years. year (see box). IGM Financial and Toromont Industries currently do not publish extensive data on social or environmental performance, however Toromont Industries provides some health and safety and environmental information in its annual report. Nortel Networks and National Bank are both working to improve their reporting on social and environmental factors, but currently neither company plans to use the GRI for future reports. Did you know Since September 2006, SHARE has contacted 39 publicly traded Canadian companies requesting information on corporate disclosure and the GRI - 17 companies, or 44%, have responded. 1 The Global Reporting Initiative (GRI) is a multi-stakeholder initiative whose primary purpose is to develop and disseminate standardized and transparent Sustainability Reporting Guidelines. The Guidelines are designed to help guide public reporting of social, environmental and economic performance by corporations and other organizations. For more information see the GRI website at 5

6 Human Rights Extractive Industry In partnership with the Public Service Alliance of Canada (PSAC) Staff Pension Fund, SHARE initiated a dialogue with Goldcorp Inc. 2 in January 2006 regarding issues of security & human rights, community consultation and sustainability management. SHARE was first alerted to community concerns at Goldcorp when protestors were killed outside of the company s Marlin Mine. Our dialogue has since expanded to include discussions regarding other mine sites as well as broader sustainability management issues at the company. PSAC Staff Fund and SHARE, along with a coalition of Canadian investors, met with company executives in April 2007 to discuss key sustainability management issues. Following the meeting, the investors agreed that formal and regular participation in key international voluntary initiatives would be beneficial for the company, and would provide management at Goldcorp with a framework of best practices to which they can aspire. On May 25, 2007 the coalition of investors sent Goldcorp a letter explaining their joint position and outlining specific recommended actions for company executives to take. A response from Goldcorp is expected in Q Global Labour Footprint Precarious Employment A notable shift is occurring in patterns of employment, particularly among workers in the The Atkinson Charitable Foundation service sector. This broad trend raises issues believes that it should implement its for investors related to corporations mission not only through the ideas, people, responsibility to employees and contractors, which may have an impact on long-term organizations and projects it supports, but shareholder value and corporate reputation. also by how it invests and otherwise uses SHARE has been working with the Atkinson Charitable Foundation around precarious its assets. Ensuring that its deeds match its employment practices in the property words, the Foundation seeks to ensure that management industry. Precarious employment refers to the use of employment practices that its grant making and investment practices emphasize short-term, temporary, low-benefit are aligned with its mission. and low-wage work. On March 29, 2007, letters were sent to two companies, Brookfield Asset Management Inc. and Morguard Corporation, requesting information about their approach to employment and contracting practices within their commercial office properties. Follow-up letters were written to the companies in Q2 2007, requesting meetings with senior staff members to discuss our concerns. Responses from both companies are expected in Q SHARE first initiated the engagement dialogue with Glamis Gold Ltd. Glamis Gold Ltd was acquired by Goldcorp Inc. in October

7 Supply Chain Management SHARE has been working on behalf of Meritas Mutual Funds on the issue of labour standards and supply chain management. How companies internally manage design, merchandizing, and purchasing departments can have a significant effect on supplier factories, mines and farms in terms of working conditions, health and safety and wages and benefits for workers. Issues that originate in a company s supply chain network can have an impact on corporate reputation, retail sales and can ultimately affect shareholder value. SHARE has initiated a dialogue with Canadian Tire Corporation regarding supply chain monitoring, auditing and compliance. Of particular interest is how the company s internal purchasing practices affect the ability of its apparel and non-apparel supplier factories to comply with the labour standards outlined in the company s code of conduct. A response from Canadian Tire regarding its purchasing practices is expected next quarter. SHARE has also contacted Aber Diamond Corporation (Harry Winston) requesting detailed information on the company s jewellery supply chain. SHARE is interested in how the company is addressing the issue of blood diamonds, and also how it ensures that the gems and metals in its supply chain are extracted in a socially and environmentally responsible manner. SHARE has requested that the company meet with us to discuss these issues further. Corporate Governance Advisory Vote on Executive Compensation Executive Compensation has been subject to increasing investor, media and regulatory attention both in Canada and in the United States. This is in part due to the public perception that CEO compensation is not properly aligned with corporate performance or shareholder expectations. Headway in the U.S. Advisory vote proposals in the US garnered majority support at five companies during the 2007 proxy season. Engagement on corporate governance this quarter has focused on the issue of implementing an advisory shareholder vote on executive compensation. Cognos Incorporated has reported that it will not adopt an advisory vote on executive compensation, although it recognizes the significance of this emerging issue in Canada. Methanex and Sun Life also indicated that an advisory vote would not be adopted. In Q SHARE also contacted six financial services companies requesting that they implement an advisory vote on executive compensation. Responses from CIBC, Bank of Montreal, Bank of Nova Scotia, Manulife Financial, Royal Bank and TD Bank are expected in Q Environment Climate Risk Disclosure Climate change has become a significant concern as investors, companies and regulators come to realize the potential impact on corporate performance and Canadian capital 7

8 markets. On May 10, 2007 SHARE wrote letters to seven companies on behalf of Meritas Mutual Funds, a signatory to the Carbon Disclosure Project (CDP), requesting that they participate in the CDP s fifth annual questionnaire on greenhouse gas emissions and risk mitigation strategies. None had participated in the 2006 survey. The letter encouraged the companies, which had also not yet responded to this year s questionnaire, to submit their response by the deadline of May 31, Canadian company participation in the CDP has been quite low in the past. Last year, only 17% of the 280 largest Canadian companies provided written responses to the CDP questionnaire. An additional five percent provided the CDP with some information on their carbon disclosure practices, while the remaining 67% either did not respond to the CDP request, or declined to answer the questionnaire CDP Response Rates for select countries or indices (number of companies surveyed) Canada (280) 17% UK FTSE (250) 36% Australia (134) 45% France (120) 45% US S&P (500) 45% Brazil (50) 60% Given such low participation rates last year, it is clear that investors have a role to play in encouraging companies to disclose information on carbon emissions. By writing companies and requesting that they answer the CDP s request for information, Meritas and SHARE hope to see an improvement in this year s Canadian response rate. Shareholder Resolutions No shareholder resolutions were filed by SHARE s clients in Q Company Progress Summary For Period April 1, 2007 to June 30, 2007 Company Topic Progress Aber Diamond Corp (Harry Winston) Supply Chain Management Agrium Inc. Climate Risk Disclosure Algonquin Power GRI Reporting ATS Automation GRI Reporting Ballard Power GRI Reporting Bank of Montreal Advisory Vote on Compensation Bank of Nova Scotia Advisory Vote on Compensation Biovail Corporation GRI Reporting Brookfield Asset Management Precarious Employment Canadian Tire Supply Chain Management Cognos Incorporated Advisory Vote on Compensation CIBC Advisory Vote on Compensation Ensign Energy Services Climate Risk Disclosure Gennum Corporation GRI Reporting 8

9 Goldcorp Inc. Human Rights Husky Injection GRI Reporting IGM Financial GRI Reporting Jean Coutu Group GRI Reporting Loblaw Companies Limited Climate Risk Disclosure Manitoba Telecom GRI Reporting Manulife Financial Advisory Vote on Compensation MDS Inc. GRI Reporting Morguard Corporation Precarious Employment National Bank of Canada GRI Reporting Nortel GRI Reporting NOVA Chemicals GRI Reporting Precision Drilling Climate Risk Disclosure QLT Inc. GRI Reporting Research in Motion Climate Risk Disclosure Rogers Communications Climate Risk Disclosure Royal Bank Advisory Vote on Compensation Shaw Communications GRI Reporting TD Bank Advisory Vote on Compensation Thomson Corporation GRI Reporting Toromont Industries GRI Reporting TransAlta Corporation Climate Risk Disclosure Transcontinental GRI Reporting Westport Innovations GRI Reporting Zarlink Semiconductor GRI Reporting Total: 41 Companies Positive On Track/Neutral Negative/ No Response Response Pending About SHARE The Shareholder Association for Research and Education (SHARE) is a non-profit organization based in Vancouver, British Columbia. Since its creation in 2000, SHARE has provided leadership, expertise and advocacy in the area of responsible investment and active share ownership. SHARE assists institutional investors implement active ownership strategies through a variety of investor services, including: Pension Investment & Governance Education Proxy Voting & Advisory Services Shareholder Engagement Contact Alberni Street Vancouver, British Columbia Canada V6E 3A3 (604) info@share.ca 9